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InCred Finance, a non-banking financial company backed by private equity firms and former Deutsche Bank co-CEO Anshu Jain, is looking to make acquisitions to start microfinance and vehicle loan businesses as part of efforts to expand its loan book.

“We are looking to shell out Rs 50-100 crore for acquisitions in the microfinance category and will buy one-two startups in the wheels financing segment for about Rs 20-30 crore,” InCred founder and CEO Bhupinder Singh told VCCircle.

Singh, a former senior Deutsche Bank executive, incorporated the company last year and raised about Rs 600 crore in August 2016 from Jain, Manipal Group managing director Ranjan R Pai, Landmark Holdings founder Gaurav Dalmia, IDFC PE, Alpha Capital and Paragon Partners.

Singh said he is the largest shareholder and owns about a third of the company. Jain and Pai are the other large shareholders. Apart from the equity funding, the company has debt commitments for around Rs 1,200 crore to lend.

The Mumbai-based company launched its operations in January and offers loans for personal and small business needs, affordable homes and education with a ticket size that ranges from Rs 50,000 to Rs 10 crore. The lender claims to have 13 branches and around 300 employees in 10 cities. It has disbursed Rs 100 crore in loans in the first three months, Singh said.

Loan book, new categories
Singh said that InCred is targeting a loan book of Rs 1,500 crore and aims to double its workforce by March 2018.
SME lending will make up nearly half of its loan book. Housing loans may account for a quarter of its portfolio and consumer loans about 10%. The other segments will contribute the remaining.

Apart from microfinance and vehicle loans, InCred is planning to enter two new categories—loans for car accessories and educational infrastructure. The average ticket size for the car accessories segment would be Rs 40,000.

Besides, it is talking to K-12 schools that need money to add classrooms, set up sports facilities or build an auditorium. The ticket size for loans in this segment will be around Rs 3 crore and the target for the loan book is Rs 500 crore in next two-three years.

Singh said another interesting segment is furniture rental. Startups in this segment, such as Rentomojo and Furlenco, require capital both for growth as well as working capital, but banks don’t meet their needs. “We are seeing tremendous demand at the right price and sensible risk in this segment,” he said.

Acquisition plans
In the microfinance segment, InCred is looking for companies with an asset book of at least Rs 200-250 crore. “I am not looking for a PE-kind play. I will be looking at a complete buyout,” Singh said.

The microfinance segment has been impacted adversely in recent months due to the central government’s ban on high-value banknotes in November and farm loan waivers by several state governments. Singh he said will decide on the timing of these acquisitions after considering such macroeconomic factors.

InCred plans to start offering micro loans in rural areas with a ticket size of Rs 10,000-50,000. The company has already tied up two so-called business correspondents that originate loans on its behalf. “We are doing this to understand the process, and then may slowly acquire the entity in phases,” Singh said.

The company is looking to build a loan book of Rs 500 crore in the next two-three years in the microfinance segment.

The lender also recently started lending for new two-wheelers and used cars, a category it calls ‘wheels financing’. The ticket size is Rs 40,000 for two-wheelers and up to Rs 4 lakh for used cars. The company said NBFCs can’t compete in the new-car segment as banks offer lower interest rates. The interest rate for used cars is around 14%, high enough for NBFCs to operate in the segment.

Singh said InCred is in talks with four-five small players that it will help scale up. For the vehicle loans segment, too, InCred is targeting a loan book of Rs 500 crore in the next two to three years.

Singh hopes to make acquisitions in both these segments within the next four to five months.

InCred has also invested in a few startups in return for a 10-15% stake. The company had invested in peer-to-peer lending platform Instapaisa and acquired the startup last year. “The idea is to support the sector and young entrepreneurs,” Singh said. “In the process, InCred will learn a trick or two from these smart players in the fintech space.”